Hurricanes create new mortgage crisis

Shelly Hebert (left) helps her daughter Lacey, 10, with a school project
Thursday while her husband David and their younger daughter Bella, 4, look on at their home in Bayou Blue.

Kathrine SchmidtStaff Writer

Published: Sunday, January 24, 2010 at 6:01 a.m.

Last Modified: Saturday, January 23, 2010 at 8:56 p.m.

HOUMA — After Hurricane Katrina, Bernadette Guidry accepted her mortgage company's offer to delay monthly payments until repairs were made to her Houma home.

Facts

Homeowners detail their experiences

The Courier talked to five families who deferred post-hurricane mortgage payments, a decision that resulted in financial woes and brought some to the brink of foreclosure. See full story, 1A. Here are their stories:

Shelly and David Hebert,Bayou BlueIn 2006, the Heberts, bought their three-bedroom, two-bath home for $139,500. Living there with their daughters, Lacey, 10, and Bella, 4, was a fresh start. Shelly Hebert, 42, had beat breast cancer.When Gustav threatened, they weren't sure if their home was going to flood, but they did know that David, 44, an assistant piping coordinator at an oilfield-service company, would be out of work for a few weeks. As the storm approached and they prepared to evacuate, they called a representative with Countrywide, who told them they could defer payments which would be added to the end of the loan.The family was told that they couldn't skip just one payment, about $1,300. They had to skip three. Once the three months were up, the Heberts began making payments again. They soon got written notice that they hadn't been approved for a deferral and were three months behind on payments.David Hebert said he's willing to cut their losses and pay off the balance, which has now ballooned to about $9,000 with penalties. He wants to tap into his 401K, even though he'll incur penalties, to erase the debt. He said he's been calling weekly for a month and a half to secure the needed paperwork. He said he's still waiting.

Charlotte LeBlanc, ThibodauxHurricane Gustav peeled the roof off her three-bedroom, two-bath home, bought for $139,000. Her son Dustin, 17, lost everything. While evacuated, LeBlanc called Chase, her mortgage company, to ask how to make the $801 payment she typically made online. When presented with the option to defer, LeBlanc said she was hesitant but, unsure of future cash flow given the extensive damage to her home, she agreed. When the three months were up, she said a Chase worker told her not to send money until someone got in touch about refinancing. She sent three checks, but all were returned. In August, she was told she had been approved for a “pre-refinance” loan with monthly payments of $972, almost $200 higher than the amount previously paid, to prove she qualified for refinancing. She's scheduled to refinance this month. If the new loan doesn't go through, LeBlanc said she's prepared to sue.“Chase has caused me to lose faith in corporate America,” she said.Chase spokesman Greg Hassell says the bank doesn't have any record of payments made between September 2008 and July 2009. Chase records only show one returned check, not three.Hassell wouldn't comment on the time it typically takes to refinance. “Every case is different,” he said, adding missing documents and payments can slow the process.

Bernadette Guidry, HoumaHurricane Katrina damaged Guidry's ranch-style house, purchased in 2001 for $144,000 with a low-interest loan from the federal Department of Veterans Affairs. She had already refinanced the home, where she lives with sons, Stafford, 12, Diaunte 18, and a nephew. After Katrina, the VA granted a six-month deferral to customers in hurricane-affected areas. Once that period was up, Guidry resumed her $1,012 payments, but said she was told to stop until her refinance went through.In June 2006, she learned the refinancing would cost $7,500 in fees, which she didn't have. She shopped around and was pre-approved by America's Choice Mortgage. A last-minute credit check, however, revealed her home was in foreclosure, even though she says Citi acknowledged in writing she was refinancing with another company.Guidry tried again to refinance through Citi with $24,000 in Road Home grant money. She didn't qualify for that loan because of an existing truck note and other bills.In March 2008, her house was listed for auction. She declared bankruptcy.The VA stepped in, buying her loan and refinancing with Countrywide. Her new note is $1,252 a month.Today she owes roughly $188,000 on the house, $49,000 more than before the storm.

Joe and Ethel Thomisee, HoumaJoe, 63, and Ethel, 85, Thomisee are retired and living in Houma. He used to work for the state penitentiary system. She's retired from BellSouth. The husband and wife have lived in their three-bedroom, one-bath home for 30 years. They were married in its den. The couple deferred two Citi Mortgage payments after Hurricane Katrina because of the storm repairs they faced. Since then, they've been paying the mortgage, but say there's been no mention of resetting the loan as they were promised. All they've gotten, Joe Thomisee said, are default notices and payment demands. “Why should I put up with it?” Joe Thomisee said. “If y'all want this house, come get it.”Kathrine SchmidtStaff Writer

Her credit was good.

She'd never missed a mortgage payment.

Four years later, the brick ranch teeters on the brink of foreclosure, she has filed for personal bankruptcy and owes $188,000 on the house, $49,000 more than before.

Guidry is one of five locals who deferred post-hurricane mortgage payments, a decision that led to financial woes, red tape that some fear they'll never unravel and nearly caused some to lose their homes.

Mortgage companies say they're working with individual owners to keep them in their homes, but they're faced with an overwhelming number of past-due loans.

A silent problem

The particulars of the homeowners' stories vary, but they share common threads.

All made the decision to defer payments amid financial uncertainty in the days surrounding a hurricane.

Each alleges mortgage companies failed to clearly explain what would happen after payments were deferred, though several admit they didn't ask either.

The complicating factor in each of these cases is the requirement that they refinance or modify the existing loan.

To do that, they must qualify.

But the missed payments show up as a black mark on their credit, making it hard to do so.

Joe and Ethel Thomisee of Houma received countless foreclosure threats from Citi Mortgage after they deferred payments following Katrina, even though those are the only payments they ever missed.

Thomisee, 63, says he knows 20 others who face the same problem and three who lost their homes. They're reluctant to speak out, he said, because they don't want to admit they're having problems.

“It has hit people on fixed incomes,” particularly the elderly and disabled who lack a financial cushion, he said. “People are losing their properties because of it.”

The homeowners now say they should have steered clear of the deferments altogether.

“I was not educated enough on the deal that was made,” Guidry said.

Hurting in New Orleans

Such cases are familiar territory for Seth Weingart, counseling supervisor at the nonprofit Greater New Orleans Fair Housing Action Center.

“That's all that we've been dealing with here since Katrina,” Weingart said. “It's basically left people in limbo.”

After the 2005 storm, hundreds of New Orleans' area homeowners were told, “Don't worry, we'll defer your payments. When you get back in your house we'll work something out, put the payments at the end of the loan,” he said.

In truth, that “is not how it works,” he said.

Instead, homeowners were expected to modify existing loans.

“To do that, you have to qualify,” he said. “And it's very difficult.”

Threats of foreclosure come, Weingart said, when companies “feel like it's the only way to get their money back.”

He acknowledges the experience is frustrating, but said his group has been unable to pinpoint anything illegal about the practice.

The corporate side

Mortgage-company representatives say tens of thousands in past-due loans resulted from the national recession. Others stem from natural disasters.

Gustav and Ike made landfall just before the financial meltdown in the fall of 2008, when bad loans rocked financial markets, large banks failed and double-digit employment hit families nationwide.

Last year alone, Chase offered 568,000 mortgage holders the opportunity to modify loans and lower monthly payments, said spokesman Greg Hassell. There's no set time on how long that takes.

“Every case is different,” he said, and the process can be slowed because of improperly submitted documents or missing payments.

Charlotte LeBlanc of Thibodaux is a Chase mortgage customer who deferred post-hurricane payments.

She said she waited four months for answers, only to be told she needed to refinance.

“This is a customer who's going through a difficult time,” Hassell said of LeBlanc. “We've offered her some help to stay in her home.”

The Thomisees are Citigroup customers. Mark Rodgers, a Citigroup spokesman, said he can't comment on specific accounts because of privacy restrictions.

In general, however, the company offered aid to hurricane-affected homeowners by suspending foreclosure proceedings, permitting payment deferrals and crafting repayment plans, he said.

“We will work with our borrowers to try to find solutions for their particular circumstances,” he said.

Local views

Thanks to a thriving oil-and-gas economy and lending sector that largely steered clear of risky adjustable-rate loans, the area has largely avoided many of the so-called subprime-loan foreclosures that swept the nation last year. In those cases, houses were bought using a minimal down payment that often saddled homebuyers with more debt than they could easily afford.

The local foreclosure rate was 1.38 percent in November, according to the most recent data available from First American CoreLogic, a firm that tracks national real-estate trends. The state rate was 2.03 percent and the national rate was 3.09 percent during that same period.

But for the head of the local realtors' association, the problems not only strike a chord: They echo her own experience.

Synde Devillier, owner of Real Estate Specialists of Louisiana and president of the Bayou Board of Realtors, skipped payments for three months after Hurricane Katrina.

Devillier said she assumed the payments would be added to the end of the loan, as was customary in her experience.

Instead, she said, the mortgage company wanted all three payments in one lump sum, threatening her with foreclosure if she didn't pay.

Refinancing the loan solved the problem.

“I should have known better,” she said.

Hearing other homeowners' recount similar experiences, makes her “blood boil.”

Possible solutions

Weingart said refinancing is the best solution.

“We've helped hundreds of homeowners get their loans modified,” Weingart said. “It can be done.”

He suggests calling his firm or another federal Housing and Urban Development-approved counseling service.

He's also recommended long-term solutions to state and federal agencies like the department of Housing and Urban Development and FEMA in preparation for future disasters.

Devillier aims to have the state Legislature examine the issue.

For now, the best alternative for homeowners is to remain vigilant and ask questions, Weingart said.

“Don't take your mortgage company's word for it when they say ‘Don't worry about making payments,' ” Weingart said. “If you have the money to continue making payments, you should continue. If you don't have the money ... you need to recognize that you still owe that money.”

Staff Writer Kathrine Schmidt can be reached at 857-2204 or kathrine.schmidt@houmatoday.com.

<p>HOUMA — After Hurricane Katrina, Bernadette Guidry accepted her mortgage company's offer to delay monthly payments until repairs were made to her Houma home.</p><p>Her credit was good.</p><p>She'd never missed a mortgage payment.</p><p>Four years later, the brick ranch teeters on the brink of foreclosure, she has filed for personal bankruptcy and owes $188,000 on the house, $49,000 more than before.</p><p>Guidry is one of five locals who deferred post-hurricane mortgage payments, a decision that led to financial woes, red tape that some fear they'll never unravel and nearly caused some to lose their homes.</p><p>Mortgage companies say they're working with individual owners to keep them in their homes, but they're faced with an overwhelming number of past-due loans.</p><p>A silent problem</p><p>The particulars of the homeowners' stories vary, but they share common threads. </p><p>All made the decision to defer payments amid financial uncertainty in the days surrounding a hurricane.</p><p>Each alleges mortgage companies failed to clearly explain what would happen after payments were deferred, though several admit they didn't ask either. </p><p>The complicating factor in each of these cases is the requirement that they refinance or modify the existing loan.</p><p>To do that, they must qualify.</p><p>But the missed payments show up as a black mark on their credit, making it hard to do so.</p><p>Joe and Ethel Thomisee of Houma received countless foreclosure threats from Citi Mortgage after they deferred payments following Katrina, even though those are the only payments they ever missed.</p><p>Thomisee, 63, says he knows 20 others who face the same problem and three who lost their homes. They're reluctant to speak out, he said, because they don't want to admit they're having problems.</p><p>“It has hit people on fixed incomes,” particularly the elderly and disabled who lack a financial cushion, he said. “People are losing their properties because of it.”</p><p>The homeowners now say they should have steered clear of the deferments altogether.</p><p>“I was not educated enough on the deal that was made,” Guidry said.</p><p>Hurting in New Orleans</p><p>Such cases are familiar territory for Seth Weingart, counseling supervisor at the nonprofit Greater New Orleans Fair Housing Action Center.</p><p>“That's all that we've been dealing with here since Katrina,” Weingart said. “It's basically left people in limbo.”</p><p>After the 2005 storm, hundreds of New Orleans' area homeowners were told, “Don't worry, we'll defer your payments. When you get back in your house we'll work something out, put the payments at the end of the loan,” he said.</p><p>In truth, that “is not how it works,” he said.</p><p>Instead, homeowners were expected to modify existing loans.</p><p>“To do that, you have to qualify,” he said. “And it's very difficult.”</p><p>Threats of foreclosure come, Weingart said, when companies “feel like it's the only way to get their money back.” </p><p>He acknowledges the experience is frustrating, but said his group has been unable to pinpoint anything illegal about the practice.</p><p>The corporate side</p><p>Mortgage-company representatives say tens of thousands in past-due loans resulted from the national recession. Others stem from natural disasters.</p><p>Gustav and Ike made landfall just before the financial meltdown in the fall of 2008, when bad loans rocked financial markets, large banks failed and double-digit employment hit families nationwide.</p><p>Last year alone, Chase offered 568,000 mortgage holders the opportunity to modify loans and lower monthly payments, said spokesman Greg Hassell. There's no set time on how long that takes.</p><p>“Every case is different,” he said, and the process can be slowed because of improperly submitted documents or missing payments.</p><p>Charlotte LeBlanc of Thibodaux is a Chase mortgage customer who deferred post-hurricane payments.</p><p>She said she waited four months for answers, only to be told she needed to refinance. </p><p>“This is a customer who's going through a difficult time,” Hassell said of LeBlanc. “We've offered her some help to stay in her home.”</p><p>The Thomisees are Citigroup customers. Mark Rodgers, a Citigroup spokesman, said he can't comment on specific accounts because of privacy restrictions. </p><p>In general, however, the company offered aid to hurricane-affected homeowners by suspending foreclosure proceedings, permitting payment deferrals and crafting repayment plans, he said.</p><p>“We will work with our borrowers to try to find solutions for their particular circumstances,” he said.</p><p>Local views</p><p>Thanks to a thriving oil-and-gas economy and lending sector that largely steered clear of risky adjustable-rate loans, the area has largely avoided many of the so-called subprime-loan foreclosures that swept the nation last year. In those cases, houses were bought using a minimal down payment that often saddled homebuyers with more debt than they could easily afford.</p><p>The local foreclosure rate was 1.38 percent in November, according to the most recent data available from First American CoreLogic, a firm that tracks national real-estate trends. The state rate was 2.03 percent and the national rate was 3.09 percent during that same period.</p><p>But for the head of the local realtors' association, the problems not only strike a chord: They echo her own experience.</p><p>Synde Devillier, owner of Real Estate Specialists of Louisiana and president of the Bayou Board of Realtors, skipped payments for three months after Hurricane Katrina. </p><p>Devillier said she assumed the payments would be added to the end of the loan, as was customary in her experience.</p><p>Instead, she said, the mortgage company wanted all three payments in one lump sum, threatening her with foreclosure if she didn't pay.</p><p>Refinancing the loan solved the problem.</p><p>“I should have known better,” she said. </p><p>Hearing other homeowners' recount similar experiences, makes her “blood boil.”</p><p>Possible solutions</p><p>Weingart said refinancing is the best solution.</p><p>“We've helped hundreds of homeowners get their loans modified,” Weingart said. “It can be done.”</p><p>He suggests calling his firm or another federal Housing and Urban Development-approved counseling service. </p><p>He's also recommended long-term solutions to state and federal agencies like the department of Housing and Urban Development and FEMA in preparation for future disasters.</p><p>Devillier aims to have the state Legislature examine the issue.</p><p>For now, the best alternative for homeowners is to remain vigilant and ask questions, Weingart said.</p><p>“Don't take your mortgage company's word for it when they say 'Don't worry about making payments,' ” Weingart said. “If you have the money to continue making payments, you should continue. If you don't have the money ... you need to recognize that you still owe that money.”</p><p>Staff Writer Kathrine Schmidt can be reached at 857-2204 or kathrine.schmidt@houmatoday.com.</p>